Protalix Undervalued On CHMP Recommendation Of PRX-102 For Fabry Disease
Feb. 26, 2023 6:52 AM ETProtalix BioTherapeutics, Inc. (PLX)6 Comments
Summary
Protalix and Chiesi received a CHMP nod for PRX-102 (pegunigalsidase alfa).
There is also an FDA PDUFA date of May 9, 2023.
There are still unknowns, but PLX stock is a bargain now that it is derisked.
Protalix BioTherapeutics (NYSE:PLX) is a small-cap biotech pharmaceutical company that on February 24, 2023 announced it had received a positive opinion from the European CHMP for pegunigalsidase alfa for Fabry disease. Also known as PRX-102, the potential therapy is licensed by Chiesi, a privately owned, large pharmaceutical company. While there are a few more hurdles before the drug becomes commercially available, this event substantially derisks the stock. Given the low market valuation of Protalix, I believe there is plenty of room for an upward climb in the stock price. This is quite a turnaround for a company that not that long ago had to complete a 1 for 10 reverse split in order to keep in compliance with listing rules.
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Protalix Platform and Q3 2022 Results
Protalix uses its plant-cell based platform, ProCellEx, to manufacture recombinant proteins. It believes these products may have advantages, like bioavailability and stability, over those produced by more traditional methods. Its first product, taliglucerase alfa (Elelyso), received FDA approval in 2012 for the treatment of Gaucher’s Disease. Pfizer licensed and distributed Elelyso, which is the sole source of product revenue. Protalix retained rights in Brazil, which due to the distribution of the mutations causing the disease, is a significant consumer.
Protalix released its Q3 2022 results and held its analyst conference on November 14, 2022. The Q4 2022 release and conference are scheduled for next week, February 27, 2023, so an update is imminent. For Q3 2022 Protalix reported revenue of $14.2 million, up 17% y/y from $12.1 million. $8.8 million of revenue was from sales of taliglucerase alfa and $5.4 million was from license and R&D services. Net loss was $3.6 million or $0.07 per share.
The cash and equivalents balance ended at $21 million. Debt was $28 million in convertible notes due in 2024. Clearly Protalix will need milestone payments from Chiesi, or a stock offering, to continue to operate. It is guiding to a cash runway through Q4 2023, based on current cash and operating expenses. It last raised money with a stock offering in February 2021.
PRX-102 or pegunigalsidase alfa
Pegunigalsidase alfa is a pegylated enzyme, produced using the ProCellEx platform, for the treatment of adults having Fabry disease. On February 24, 2023, Chiesi and Protalix announced the CHMP (Committee for Medicinal Products for Human Use) recommended marketing authorization to the EMA (European Medicines Agency). While this does not guarantee the EMA will grant approval, it is unusual for it to go against the CHMP recommendation. Pegunigalsidase alfa acts as an enzyme replacement therapy. A final decision is expected in May 2023. The submission included data on a dosing schedule of both every two weeks and every four weeks. It is not clear which dosing schedule will be in the label.
In the U.S.A. Chiesi resubmitted the BLA to the FDA on November 9, 2022. This included data for dosing every four weeks. On December 5, 2022 the FDA accepted the pegunigalsidase alfa BLA, with a PDUFA (action) date set to May 9, 2023. There has been no announcement as to whether the FDA will call for an Advisory Committee hearing.
Licensing deal with Chiesi
In 2018 Protalix expanded its existing partnership with Chiesi, granting Chiesi U.S. rights for pegunigalsidase alfa. In 2017 the ex-US rights had been granted to Chiesi. For the U.S. rights Protalix received $25 million upfront and would receive up to $7.5 million per year in development costs. Protalix could receive another $760 million in regulatory and milestone payments plus tiered royalties ranging from 15% to 40% of sales. Protalix would have manufacturing responsibility.
The ex-U.S. Protalix agreement with Chiesi also included $25 million upfront and $25 million for additional development costs. Milestones could bring in $320 million. Royalties would be tiered from 15% to 35% of net sales.
Competition and other Caveats
There are already two enzyme replacement therapies on the market, Fabrazyme and Replagal. The main advantage of pegunigalsidase alfa is expected to be its longer half-life and dosing interval. Fabrazyme was developed and is sold by Sanofi (SNY), dosed every two weeks. Replagal is sold in Europe by Takeda (TAK) which bought the developer, Shire. But Shire pulled back its FDA application for Replagal sales in the U.S. in 2012, so it is not a competitor in the U.S.
Sangamo (SGMO) has released positive, preliminary Phase 1/ 2 data for its Fabry disease gene therapy candidate isaralgagene civaparvovec. Sangamo expects to complete the trial by the end of 2023 and possibly begin a Phase 3 trial by the end of 2023. Gene therapies typically cost far more than other therapies and therefore, so far, have had their own problems with market acceptance.
Analysis
In late 2022, when Protalix was trading near $1.00 per share, its market capitalization was under $50 million. At the end of day on February 24, 2023 the stock closed at $1.82, giving it a market cap near $86 million. It now seems highly likely, though not guaranteed, that pegunigalsidase alfa will be available internationally. Following approval, it will still need to be cleared for reimbursement by national insurers. Even with approvals, there remains to be seen the pace of the ramp and to what extent pegunigalsidase alfa is able to replace the enzymes already on the market.
The exact milestone payments for approvals are not known, but if they are received should get Protalix out of its current cash bind. If substantial money comes in from milestones or royalties, that will likely mainly go to restarting the earlier stage drugs in the Protalix pipeline. They were mostly paused to focus on the immediate commercial opportunity. I think at a market cap of just $86 million the stock is very attractive and quite derisked. It is an obscure stock, so it could be bid up considerably further, or we might need to wait for the actual EU and US regulatory approvals. Even keeping in mind that there is risk of commercial failure, it seems that the current stock price undervalues the company. As we see more events, including approvals (or not) and sales in 2024, it will be easier to put a more precise valuation on Protalix.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
William Meyers profile picture
William Meyers
7.37K Followers
I provided stock and bond research and analysis to a small cap specialist investor, Lloyd Miller, from 2002 until his death in January 2018. For my own account I invest mainly in technology and biotechnology stocks. My technology and investment web site is openicon.com, where readers can view the notes I take to make decisions and to write articles for Seeking Alpha.
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Disclosure: I/we have a beneficial long position in the shares of PLX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I increased my PLX position by about 30% on 2/24/2023 before writing this article. Despite that, at end of the day it constituted about 1.2% of my portfolio.
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